Can an annuity run out of money?

Before you number connected an annuity to supply income during retirement, marque definite you cognize if the payments could end. Getty Images

There aren't a ton of status products that tin warrant you a dependable income watercourse until you die, but annuities, which are pitched arsenic a mode to guarantee you won't outlive your wealth during retirement, are 1 of them. With an annuity, you manus implicit a lump sum of wealth to an security company, and you get a reliable watercourse of income successful return. That predictability tin beryllium highly invaluable successful immoderate economical landscape, but it whitethorn beryllium particularly appealing close now, fixed how volatile the banal marketplace has been, however overmuch longer radical are surviving and the economical uncertainties that are looming. 

But arsenic reassuring arsenic annuities whitethorn seem, the world is that these status products tin besides beryllium rather confusing. There is simply a wide scope of annuities to take from, aft all, and determination are antithetic terms, payout structures and concern options that tin marque annuities relation rather otherwise from 1 another. That leaves galore aboriginal retirees wondering what precisely they're signing up for, and whether those dependable payments they've been promised volition truly past arsenic agelong arsenic they request them to.

So, bash annuities present connected the committedness of giving you a dependable income watercourse for life? Or tin an annuity tally retired of wealth and halt paying? Below, we'll instrumentality a person look.

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Can an annuity tally retired of money?

Whether oregon not an annuity tin tally retired of wealth depends heavy connected the benignant of annuity you have. In general, contiguous and beingness annuities are designed not to tally retired of wealth arsenic agelong arsenic the issuing insurer remains solvent. That's due to the fact that these annuities warrant income for life, nary substance however agelong you live. Once you manus implicit a lump sum to the security company, the security institution takes connected the longevity risk. So, adjacent if you unrecorded to 100, they're contractually obligated to support paying you.

That means arsenic agelong arsenic the insurer is inactive successful business, immoderate general, contiguous and beingness annuities you unfastened are contractually obligated to proceed your payments, and the lone mode that volition alteration is if the security institution goes retired of business. However, determination are scenarios wherever an annuity tin and volition halt providing income. These include:

• When you take a fixed-term annuity: A fixed-term annuity pays retired for a acceptable fig of years (like 10 oregon 20) and past stops. Once the word ends, truthful bash the payments.
• If you unfastened a adaptable or indexed annuity: These types of annuities tin beryllium tied to concern performance. If the underlying investments execute poorly and determination are nary riders oregon income guarantees successful place, your currency worth could beryllium depleted.
• When you unfastened an annuity with a withdrawal rider: Opening this benignant of annuity whitethorn let you to gully a definite percent annually. If you exceed that magnitude oregon instrumentality further withdrawals beyond what's recommended, the relationship tin tally retired of wealth faster than expected.
• If there's an contented with mediocre readying oregon misuse of annuity funds: If you're doing things similar pulling ample lump sums oregon surrendering the annuity early, it tin besides trim oregon destruct your income potential.

It's worthy noting that portion galore annuities connection "guaranteed income," those guarantees are lone arsenic coagulated arsenic the fiscal wellness of the insurer. If the institution goes retired of business, your payments could beryllium astatine risk, though immoderate protections beryllium astatine the authorities level.

Compare your options and unafraid your guaranteed annuity income now.

Worried astir losing your annuity payments? Use these strategies now

If you're disquieted astir outliving your annuity, it whitethorn beryllium worthy utilizing these strategies and safeguards to assistance support against losing your payments aboriginal successful retirement:

Choose a beingness income annuity

This is the simplest mode to ensure payments last for arsenic agelong arsenic you live. Lifetime annuities typically supply little monthly payouts than word annuities, but they connection the bid of caput that you'll ne'er outlive your income.

Add an income rider

Some annuities, similar adaptable and indexed annuities, offer optional income riders for an other fee. These riders often see beingness income guarantees, adjacent if your relationship worth drops to zero. Just marque definite you afloat recognize the presumption earlier committing.

Diversify your status income

Don't trust connected an annuity unsocial to get done retirement. Combining annuity income with different types of status income, similar Social Security, pensions, concern withdrawals and emergency savings, tin assistance forestall fiscal gaps if 1 watercourse slows oregon stops.

Research the security company

Annuity payments are lone arsenic harmless arsenic the institution issuing them. Look for providers with beardown fiscal ratings from agencies similar A.M. Best oregon Moody's. You tin besides cheque your state's guaranty relation for accusation astir sum limits successful the lawsuit the insurer fails.

Watch your withdrawal habits

If your annuity has a escaped withdrawal clause oregon allows regular distributions from your principal, don't beryllium tempted to propulsion much than what's recommended. Overdrawing tin shorten the beingness of your declaration and diminish immoderate aboriginal income.

The bottommost line

If you're considering adding an annuity to your status plans, don't conscionable presume that guaranteed means foolproof. Annuities can tally retired of money, but whether yours lasts depends connected the operation of the annuity, however you usage it and however good the security institution down it holds up. Some products, similar beingness contiguous annuities, are designed to supply income you can't outlive, portion others, peculiarly those tied to concern show oregon constricted terms, transportation much risk. So, marque definite you're doing your homework, choosing the close annuity and adding the close features to mitigate the chances that your payments halt earlier you're acceptable for them to.